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Inequality and Trust

This paper reviews the literature on economic inequality and trust. Cross-country studies, within-country studies, and experiments all suggest that economic inequality exerts a negative influence on trust. Four mechanisms are proposed to explain the negative relationship: social ties (or networks), inference on social relationships (to see inequality as a signal of untrustworthy behavior), conflicts over resources, and opportunity cost of time. Social ties receive the strongest empirical support, but there is also some evidence in favor of inference on social relationships. Conflicts over resources and opportunity cost of time are contradicted by important pieces of evidence.

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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 715.

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Length: 21 pages
Date of creation: 21 Aug 2007
Date of revision:
Publication status: Published in Handbook of Social Capital, Svendsen, Gert, Svendsen, Gunnar (eds.), 2009, chapter 19, Edward Elgar.
Handle: RePEc:hhs:iuiwop:0715
Contact details of provider: Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Phone: +46 8 665 4500
Fax: +46 8 665 4599
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  1. Dean Karlan & Markus Mobius & Tanya Rosenblat & Adam Szeidl, 2009. "Trust and Social Collateral," The Quarterly Journal of Economics, MIT Press, vol. 124(3), pages 1307-1361, August.
  2. Leigh, Andrew, 2006. "Does equality lead to fraternity?," Economics Letters, Elsevier, vol. 93(1), pages 121-125, October.
  3. Glaeser, Edward Ludwig & Laibson, David I. & Scheinkman, Jose A. & Soutter, Christine L., 2000. "Measuring Trust," Scholarly Articles 4481497, Harvard University Department of Economics.
  4. Berggren, Niclas & Jordahl, Henrik, 2005. "Free to Trust? Economic Freedom and Social Capital," Ratio Working Papers 64, The Ratio Institute.
  5. Gustavsson, Magnus & Jordahl, Henrik, 2006. "Inequality and Trust in Sweden: Some Inequalities are More Harmful than Others," Ratio Working Papers 106, The Ratio Institute.
  6. Alesina, Alberto & La Ferrara, Eliana, 2002. "Who trusts others?," Journal of Public Economics, Elsevier, vol. 85(2), pages 207-234, August.
  7. Alberto Alesina & Eliana La Ferrara, 2000. "Participation In Heterogeneous Communities," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 847-904, August.
  8. Hilde Coffé & Benny Geys, 2006. "Community Heterogeneity: A Burden for the Creation of Social Capital?," Social Science Quarterly, Southwestern Social Science Association, vol. 87(s1), pages 1053-1072.
  9. repec:ebl:ecbull:v:26:y:2006:i:4:p:1-20 is not listed on IDEAS
  10. Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
  11. Lisa Anderson & Jennifer Mellor & Jeffrey Milyo, 2006. "Induced heterogeneity in trust experiments," Experimental Economics, Springer, vol. 9(3), pages 223-235, September.
  12. Andrew Leigh, 2006. "Trust, Inequality and Ethnic Heterogeneity," The Economic Record, The Economic Society of Australia, vol. 82(258), pages 268-280, 09.
  13. Niclas Berggren & Mikael Elinder & Henrik Jordahl, 2008. "Trust and growth: a shaky relationship," Empirical Economics, Springer, vol. 35(2), pages 251-274, September.
  14. Johansson-Stenman, Olof, 2006. "Who Are the Trustworthy, We Think?," Working Papers in Economics 222, University of Gothenburg, Department of Economics.
  15. Atkinson, A.B. & Brandolini, A., 2000. "Promise and Pitfalls in the Use of 'Secondary' Data -Sets: Income Inequality in OECD Countries," Papers 379, Banca Italia - Servizio di Studi.
  16. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, World Bank Group, vol. 10(3), pages 565-91, September.
  17. Stephen Leider & Markus M. Möbius & Tanya Rosenblat & Quoc-Anh Do, 2007. "Directed Altruism and Enforced Reciprocity in Social Networks: How Much is A Friend Worth?," NBER Working Papers 13135, National Bureau of Economic Research, Inc.
  18. Christian Bjørnskov, 2007. "Determinants of generalized trust: A cross-country comparison," Public Choice, Springer, vol. 130(1), pages 1-21, January.
  19. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1251-88, November.
  20. Morgan Kelly, 2000. "Inequality and crime," Open Access publications 10197/523, School of Economics, University College Dublin.
  21. La Ferrara, Eliana & Alesina, Alberto, 2000. "Participation in Heterogeneous Communities," Scholarly Articles 4551796, Harvard University Department of Economics.
  22. Morgan Kelly, 2000. "Inequality And Crime," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 530-539, November.
  23. Justina A.V. Fischer & Benno Torgler, 2006. "The Effect of Relative Income Position on Social Capital," Economics Bulletin, AccessEcon, vol. 26(4), pages 1-20.
  24. Zak, Paul J & Knack, Stephen, 2001. "Trust and Growth," Economic Journal, Royal Economic Society, vol. 111(470), pages 295-321, April.
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